Correlation Between AAR Corp and ProShares UltraShort

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Can any of the company-specific risk be diversified away by investing in both AAR Corp and ProShares UltraShort at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining AAR Corp and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAR Corp and ProShares UltraShort Utilities, you can compare the effects of market volatilities on AAR Corp and ProShares UltraShort and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in AAR Corp with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAR Corp and ProShares UltraShort.

Diversification Opportunities for AAR Corp and ProShares UltraShort

0.09
  Correlation Coefficient

Significant diversification

The 3 months correlation between AAR and ProShares is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding AAR Corp and ProShares UltraShort Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and AAR Corp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on AAR Corp are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of AAR Corp i.e., AAR Corp and ProShares UltraShort go up and down completely randomly.

Pair Corralation between AAR Corp and ProShares UltraShort

Considering the 90-day investment horizon AAR Corp is expected to generate 0.94 times more return on investment than ProShares UltraShort. However, AAR Corp is 1.07 times less risky than ProShares UltraShort. It trades about -0.27 of its potential returns per unit of risk. ProShares UltraShort Utilities is currently generating about -0.31 per unit of risk. If you would invest  6,637  in AAR Corp on December 30, 2023 and sell it today you would lose (650.00) from holding AAR Corp or give up 9.79% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

AAR Corp  vs.  ProShares UltraShort Utilities

 Performance 
       Timeline  
AAR Corp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days AAR Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, AAR Corp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.
ProShares UltraShort 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days ProShares UltraShort Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, ProShares UltraShort is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

AAR Corp and ProShares UltraShort Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AAR Corp and ProShares UltraShort

The main advantage of trading using opposite AAR Corp and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAR Corp position performs unexpectedly, ProShares UltraShort can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ProShares UltraShort will offset losses from the drop in ProShares UltraShort's long position.
The idea behind AAR Corp and ProShares UltraShort Utilities pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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